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Taxing Corporate Profits: A Proposal Table I TOTAL PROPERTY TAXES PER CAPITA FOR THE FIVE-STATE REGION STATE PROPERTY TAX COLLECTIONS PER CAPITA TEXAS $243.72 OKLAHOMA $136.90 NEW MEXICO $119.80 ARKANSAS $110.70 LOUISIANA $ 96.26 Table II TOTAL PROPERTY TAXES PER CAPITA FOR STATES WITHOUT A CORPORATE INCOME TAX WYOMING $478.98 NEVADA $278.59 WASHINGTON $261.52 TEXAS $243.72 \(Source: Tax Capacity of the Fifty States: Methodology and Estimates. Advisory Commission on Intergovernmental Relations: Austin IF IT WOULDN’T hurt educational financing, would you be willing to knock $166 off your school property tax bill?’ And double the elderly/ disabled exemption? And abolish the can do it next year if the legislature will approve taxing corporate profits at a rate far below the national average. 2 More than $33 billion in corporate profits are untaxed in Texas. 3 The special interests claim that this keeps government spending low and encourages economic growth, but the truth is that the citizens. of Texas have paid dearly for legislative reluctance to tax corporate income. The ultra-rich conglomerates have bought their free ride by forcing property taxes to record levels and by limiting competition with the highest license taxes in the country. Both taxes prey on those with far less political clout small businesses and the owners of homes in poorer communities. On a per capita basis, property taxes in Texas are more than 10% higher than those in California, the home of Proposition 13. And they are double those collected by our bordering states. 4 Worse yet, in the last four years 355 school districts have eliminated optional exemptions for the elderly. 5 In the face of demands for higher teacher salaries, reduced federal aid, declining revenue sources, and explosive population growth, school taxes are certain to continue escalating rapidly. Instead of taking action to reduce tax increases, however, the State of Texas and now the federal government have dumped their responsibilities onto local governments. In Texas the primary tax base of local governments is property. In 1980, Texas ranked 24th in the nation in local government expenditures. 8 That was before By State Representative Senfronia Thompson two straight years of record increases in school property taxes and valuations. The 1980-81 school tax hike doubled the previous record.’ These increases have been particularly painful for working families. For lowerand fixed-income homeowners, school taxes have become a heavy burden. Residents in poorer school districts already pay far more than their fair share of taxes. The reason is simple: school districts with little of value to tax must tax more and get by with less. Few poor school districts ever offered optional exemptions of any kind. As it is now, the quality of a child’s education in Texas is based on the money his or her family has. In general, the poorer a school district’s tax base, the higher the tax rate becomes and the lower the tax revenue collected. Thus, a taxpayer in the North Forest Independent School District in Harris County pays $441 on a $40,000 homestead, while a homeowner in Deer Park \(also in Hartion. Yet Deer Park spends six times more per pupil than North Forest. The legislature has worked on equalizing school finance formulas for the last ten years, but we cannot change a school district’s tax base. Similarly, Texas also taxes businesses on assets rather than profit, thus discouraging new investments and expansion. Our corporate franchise tax is really a so-called license tax to do business in our state. Texas collected over 25% of the entire nation’s corporate license tax revenue in 1980. That’s 47 times more than New York, 73 times more than California, and 31/2 times more than all the states surrounding us combined. 8 According to the Advisory Commission on Intergovernmental Relations, Texas collects 468% of the average state franchise tax per person. On a per capita basis, only Delaware collects more in corporate license taxes. Yet, compared to other states on a per capita basis, Texas’ corporate population is just 85% of .the national state average. Less populous states like Florida and New Jersey each have more operating corporations 9 License taxes tend to fall disproportionately on smaller businesses. In 1980, 81% of all corporations in Texas controlled less than 5.6% of our state’s corporate wealth. Yet the effective tax rate on the smallest businesses was at least double the rate paid by the 80 giant conglomerates worth $100 million or more.’ In essence, four of every five Texas businesses are overtaxed. Thus, our tax structure discourages the very businesses that create new jobs; MIT’s survey of 5.6 million companies found that THE TEXAS OBSERVER 19